Elizabeth Warren has another study out showing that medical expenses contribute to more than half of all bankruptcies--indeed, this time, it's 70%, up from the 50% she found in 2001.

Now, it is possible that this is true. The fact that it seems to disagree with every other study I've ever read that is not authored by Elizabeth Warren, and also, the self-reports of the people in her study (only about a third of whom attribute their bankruptcy to a health problem) could just be a fluke. It doesn't necessarily mean that it's wrong.

Yet upon closer examination, it turns out that it is not just wrong, but actively, aggressively wrong. Warren and her co-authors have obscured important and obvious facts that call the integrity of the work into serious question.

The text itself raises a huge red flags. It's hard to believe that
more than half of people who have been pushed into bankruptcy by a
medical issue don't understand this fact. Perhaps they are not the
brightest bulbs on the Christmas tree, but could it really be true that
most people catapaulted into a financial crisis by their medical bills
don't even notice that health care expenses are their main problem?

My
radar is further engaged by the fact that they're implying a really
astonishing surge in medical-bill-driven bankruptcies, in a healthcare
environment that just didn't change all that massively. Their study
opens:

As recently as 1981, only 8% of families filing for bankruptcy did so
in the aftermath of a serious medical problem. By contrast, our 2001
study in 5 states found that illness or medical bills contributed to
about half of bankruptcies.

Since then, the number of un- and underinsured Americans have grown,
health costs have increased, and Congress tightened the bankruptcy laws.

In those six years, the percentage of uninsured families ground
upward, and health care cost continued to rise at about twice the rate
of inflation. But a 2.5% real annual increase in the cost of a budget
item that accounts for something like 5% of annual household expenditures shouldn't make the bankruptcy stats jump that much.

Perhaps
there was a big increase in the volatility of those expenditures, with
the average growing slowly, but a larger number of people being hit by
truly massive bills? Perhaps, but I'm aware of no data that show it.
Yes, people complain about deductible increases and more cost-shifting,
but a $500 or $1000 increase in the annual deductible won't tip any
family into bankruptcy, and the complaints about denied claims go back
long before 2001. For this to be causing such a huge surge in
bankruptcies, health care companies would have had to discover some
extraordinarily clever new way to deny people health care benefits
without being sued, or fired by the companies who buy their insurance.
If they have, it hasn't been a prominent feature in the recent
health-care debate. As far as I know, they're still using the same old
strategy of outlasting and/or confusing their patients.

Yet
Warren, et al. claim their current results both show a dramatic
increase, and are in robust agreement with their earlier study. How
could steadily, moderately rising medical bills, a roughly static
business and legislative environment, and a small increase in the
uninsured, possibly have driven up bankruptcies so massively?

Answer:
they didn't. What Warren et. al. neglect to mention is that
bankruptcies fell between 2001 and 2007. In fact, they were cut in
half. Going by the numbers Warren et. al. provide, medical
bankruptcies actually fell by almost 220,000 between 2001 and 2007, a
fact that they not only fail to mention, but deliberately obscure.

Are
Warren, et. al. unaware that bankruptcies fell by half? No bankruptcy
analyst could possibly be unaware of this fact; it has been the most
talked-about phenomenon in the bankruptcy area since the 2005 law was
passed. Moreover, they're clearly familiar with the filings data,
because they use it to make their point:

The number
of filings spiked in mid-2005 in anticipation of the new law, then
plummeted. Since hten, filings have increased each quarter. They are
likely to exceed one million households in 2008, representing about 2.7
million people.

What's left out here? That in
2001, 1.45 million households filed for bankruptcy. In 2007, that
number was 727,167. Had their paper done the basic arithmetic,
readers would easily have seen that their own numbers imply a decrease
in medical bankruptcies, from about 750,000 to
slightly over 500,000. Yet their paper does not merely ignore this
fact; it uses language that seems deliberately designed to conceal it.
I invite any of my readers to scan the paper for any hint that medical
bankruptcies had fallen significantly over 6 years.

This
is elementary social science. A huge change in the composition of your
sample needs to be noted. It certainly should not be artfully
disguised. If the 2005 bankruptcy form made it more difficult to file
bankruptcy, the people who still file bankruptcy will largely be those
who are forced to it by events totally beyond their control. Medical
bankruptcies seem to fill that bill.

Yet even so, their own work shows medical bankruptcies falling in the years between 2001 and 2007, which would seem to invalidate, not support, the claim that half of all bankruptcies in 2001 were driven by medical events beyond the household's control.

Elementary
googling reveals that the two doctors who co-authored this study are
prominent spokespeople for Physicians for a National Health Program,
and thus have an obvious agenda, one that Elizabeth Warren has not been
shy about sharing. The American Journal of Medicine, which published
this study, seems to have flunked Peer Review 101--I sure hope they're
more careful about controlling for background conditions when they're
talking about cures for cancer Also wearing duncecaps are the
journalists who are already uncritically parroting it.

There
is, of course, a large amount of terrible advocacy masquerading of
social science out there, and too many journals and journalists abet
it. But this is particularly troubling because Elizabeth Warren is now
in charge of overseeing the TARP program for Congress. What other
inconvenient facts is she shielding us from?

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